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I believe there are one or two others who have very brief statements to make that we will hear Monday morning. I could attend next week's hearings of the committee at any time and it may be representatives of these insurance companies could also appear during the coming week; but I had agreed with Mr. Thatcher that his committee members who were scattered out over the country might appear on the 8th. That is a week from Monday.

Well, if agreeable, we will now recess at the call of the chairman and I will undertake to get Mr. Valgren for Monday morning.

(The address of Dr. John Lee Coulter referred to by Mr. Brenckman appears as follows:)

PROBLEMS RELATING TO CROP INSURANCE

Address by John LEE COULTER Farmers and members of farmers' families, like other citizens especially in the United States, are large buyers of life insurance.

Great numbers of owners of farm buildings, like owners of nonfarm buildings, buy all sorts of protection, such as fire, wind, tornado, and other forms of insurance. Frequently this covers the contents of the buildings, such as furniture in the homes, grain, hay, and other feed materials in the barns, etc. Farmers to a very large extent carry insurance on livestock, especially horses, mules, and cattle, and especially against death from fire, lightning, diseases, etc.

INSURANCE THROUGH DIVERSIFICATION To a degree generally not realized, large numbers of substantial farmers carry a form of insurance which does not call for the payment of annual premiums to insurance companies. This is the form of insurance carried by the operator of the family-type farm where well organized, diversified agriculture is the rule. Here the farmer provides for a substantial part of the food supply for the family, such as vegetables, fruits, poultry products, dairy products, meats, etc., so that if cash crops are unusually damaged or prices are unusually depressed the family none the less is able to carry on confortably until better conditions prevail. This form of farm insurance is even more distinctive than might be indicated by what I have just said, because it is well known that the same type of insect pest and plant disease seldom attacks a number of diversified crops. Perhaps the corn borer passes by the potato field. The black-stem rust of wheat passes by the corn field. Smut, wilt, scab, etc., attack special crops at special times in special areas. Root rots and other root diseases and insect enemies, likewise, have their special tastes. And so on and on.

But it is not only that different crops and livestock are attacked by different insects and diseases. They have different times for planting and for harvesting and different periods for maturity. Certain types of barley may mature in 45 days; certain types of oats in 60 days; certain types of wheat in 90 days; certain types of corn in 120 days; etc., etc. Thus hot winds, excessive or deficient moisture, and other climatic factors may affect one item in the farmer's program without destroying all of his cash or feed crops. In other words, a late frost in the spring or an early frost in the fall may catch one crop but do no injury to the others. Hail at a given season may damage one crop beyond recovery but another crop in the adjoining field may entirely recover.

INSURANCE THROUGH RESERVES But there is still another form of farm insurance largely carried by great numbers of the more responsible and successful farmers of the country. This insurance takes the form of providing a nest egg for a rainy day. During a year of large yields or exceptional prices, the farmer may either pay off mortgages or if he has none of these may store some of the nonperishable crops, like wheat, either on the farm or in elevators, or he may sell and maintain savings accounts, or perhaps in some cases even purchase bonds or other dependable securities. Ordinarily such farmers take advantage of these good years to extensively rehabilitate fences, buildings, machinery, etc.

CROP INSURANCE But I would not want to give the impression that all of the six or seven million farmers in the United States are adequately covered by insurance. I recall 35 years ago, in 1901, I was a college student studying agricultural problems and especially the economic phases of agriculture. In that year there was a great drought in the Corn Belt which reminds me of the drought in 1934 and 1936. At that time we had no organized crop reporting service or political campaign in progress, but the press recited that it was the worst drought in 20 years and reference was made to the drought of 1881. It is interesting to note that in the period of 50 years (from 1866 to 1916) the yield of corn had fallen below 20 bushels per acre on only two occasions (1881 and 1901), and went above 30 bushels in only two years (1905 and 1906).

For a period of 10 years, beginning in 1901, I undertook to investigate the statistics or mathematics and actuarial features of crop insurance and not only talked about it and wrote about it but conducted classes in agricultural colleges dealing with the subject. During that period inuch was said about the 7 good years and the 7 bad years in Egypt and the plans made by Joseph for everready granaries. During these studies I spent years at the agricultural colleges and universities of Iowa, Wisconsin, Minnesota, and North Dakota, where the subject was most prominently discussed. One of my students at Minnesota in 1910 went so far as to write a con.prehensive college thesis on the subject and that great United States Secretary of Agriculture, “Tana Jim" Wilson of Iowa, thought so highly of the thesis and of the young man who wrote it and of the possibilities of crop insurance that he ordered the establishment of a crop-insurance office in the Department of Agriculture. All crop estimators and crop reporters throughout the United States were instructed to organize and com.pile data pertaining to the possibilities of crop insurance.

THEODORE ROOSEVELT INTERESTED IN SUBJECT As an aside it should be mentioned here that this subject was very much in the mind of President Theodore Roosevelt at the time of his appointment of the Rural Life Commission, and the idea was given serious consideration by President Taft. When President Wilson cane to the White House he requested the newly selected Secretary of the Departn.ent of Agriculture (Hon. David Franklin Houston, now president of one of the Nation's greatest insurance comnanies) to pursue the studies. This was done year after year and at the close of the World War con.prehensive results covering a 10-year period were prepared.

In order to illusirate the extent of this study, it is important to note that the investigation was carried on in every State in the United States and pertained to deficient moisture, excessive moisture, floods, frost, hail, hot winds, storms, other climatic factors (such as winter killing of grain) and also included plant diseases, insect pests, aniii al pests and other causes for loss of crops, such as defective seed, etc. For each year for 10 years each of these factors was carefully checked and studied for each State for a long list of crops, including not only grains and seeds but such special crops as potatoes, tobacco, cotton, hay, etc.

During this period every effort was made to lay a definite actuarial foundation upon which crop insurance policies might be based. It is interesting to know that a number of crop insurance companies were formed and a number of other large insurance companies established divisions of crop insurance and great numbers of crop insurance policies were written. A number of farm bulletins were written upon the subject, two of the most interesting of which were United States Department of Agriculture Bulletin No. 912, which covered the subject of hail insurance and United States Department of Agriculture Bulletin No. 1043, published in 1922, pertaining to crop insurance, risks, losses, and principles of protection. : President Harding and President Coolidge kept up the investigations after the ground work had been laid by Presidents Theodore Roosevelt, Taft, and Wilson, and the basic studies were continued under President Hoover. The truth of the matter is these investigations have continued down to the present time and a tremendous volume of data is available for those who would seriously go into the subject at this time. · It is not to be presumed that this form of crop insurance was introduced and then abandoned. The truth of the matter is crop insurance, covering several types of policies, is in use to some extent at the present time.

NORTH DAKOTA FURNISHES HAIL INSURANCE A number of States actively took up a study of crop insurance under State governmental auspices. Reference may be made especially to such States as North Dakota, South Dakota, Nebraska, and Montana. The North Dakota State Hail Insurance Department was created about 20 years ago. The seventeenth consecutive annual report of that department covering business for the season 1935 came to my attention a few days ago. The report indicates that the total risks written in 1935 by this State crop insurance department was almost $35,000,000 and the premiums paid amounted to about $3,000,000. More than one-half of the farmers of North Dakota applied for and secured policies during 1935. Losses paid amounted to nearly $3,000,000 and on January 1, 1936, the department had a surplus fund of about $3,000,000.

This leads me to a d'scussion of one or two details which deserve special consideration. When the North Dakota law was first paesd it provided for compulsory crop insurance. In other words, every farmer in the State was provided with insurance whether he wanted it or not. Furthermore, the insurance premium was collected from him along with and as a part of his taxes by the regular tax collectors in each county in the State. Farms could be sold for failure to pay premiums. After a few years of experience, the people of North Dakota decided that the compulsory feature was not characteristic of the people of the United States and the law was changed to make the insurance voluntary. It is, however, of great interest to note that in 1935 after nearly 20 years of experience considerably more than half of the farmers in the State applied for insurance and paid their premiums and those who suffered damage got paid for their losses.

Another rather interesting feature of the North Dakota law was the fact that in the beginning a flat rate per acre was imposed throughout the State as a premium against loss from hail. After a few years had passed a study of actual experiences showed that hail was very much more prevalent in some sections than in others and much more damage was done in some sections than in others. After prolonged discussion the State system was again changed and now the State is divided into zones according to the prevalence of. hail and the premiums differ according to the section of the State in question.

Time does not permit an extensive discussion of the whole question of farm insurance. It only permits me to direct attention to the fact that at least since the beginning of this century the subject has been extensively and thoughtfully studied by large numbers of farmers and farm leaders and students of farm economics. It is important to note also that there is a large body of experience upon which to be drawn so that many of the mistakes made in the earlier years need not be repeated is the subject is further developed as a result of the recurrent discussion at the present time.

It should be uoted that the question of percentage of coverage-i. e., whether 60 percent, 75 percent, or 80 percent of a long-time average crop-is one that has been extensively investigated. For the United States corn yield has fallen below 20 bushels four times and exceed 30 bushels four times, during the last 70 years. But on individual farms it has run all the way from zero to 70 bushels, over and over again for a hundred reasons.

Whether premium should be paid in money or product-and whether only in good years—is also a subject long studied.

Whether payment of losses should be in money or product has likewise been studied. It is interesting to know that in agriculture great numbers of farms are bought and sold on the basis of a share of the cash crop for a given number of years; and perhaps on 2,000,000 tenant farms the rent is paid, not in cash, but in the form of a share of the crop.

STEERING CLEAR OF COMPLICATIONS

Whether the present interest in farm insurance is due to recent world-wide price disturbances, or to the extent and character of recent droughts, or to the fact that these two situations have happened concurrently with a great political campaign, it will be important that students of the subject do not allow themselves to confuse world-wide price fluctuations or extraordinary drought years or political expediency with so important a subject as farm-crop insurance.

For a number of years farm leaders and a number of States have been studying the question of the ever-ready granary, especially from the standpoint of farm storage, local elevators, and terminal warehouses. A number of State legislatures have passed necessary laws and in a number of States farmers may now store their grain on their farms or at local elevators, or terminal warehouses

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and with proper insurance may borrow on the basis of storage certificates. On the other hand, the National Government under the late Farm Board undertook the development of the ever-ready granary idea on a Nation-wide scale.

Corporations were set up to store the surplus wheat and cotton with results well known to all students of agricultural problems. A series of exceptional crops, large surpluses, and a world-wide price collapse found this country carrying the ever-ready granary or warehouse at the expense of the National Treasury.

After a study of this subject for a period of 35 years, both in this country and in some 25 foreign countries, your speaker today would say that there is a tremendously useful field here and one which merits serious consideration by all of the large agricultural organizations of the Nation. It is of first importance, however, that we do not permit ourselves to complicate the question of individual farm insurance with the question of world-wide or Nation-wide ever-ready granary problems. The types of damage to growing farm products have been extensively studied. Types of insurance policies have been studied and extensively tried out. Some have fallen by the wayside, some are still in use. Storage on farms and in local elevators and terminal warehouses has been studied and is in successful use.

The problems of national warehousing have likewise been extensively studied and actively used not only over a period of years in this country but over a period of many years in many other countries. It is sincerely to be hoped that from all of the experience with all of the problems involved mistakes of the past may be corrected and as the years roll by improvements and advancement may be made.

National agricultural organizations such as the Grange, on whose radio hour I speak today, will render great service to their members and the general welfare of the Nation by continued study of this most important subject. It is sincerely to be hoped that useful State and National legislation will be promoted, and especially that we may be able to keep the problem of world-wide price movements, extraordinary droughts, the problem of the annual carry-over of nonperishable crops, and all partisan political discussion out of the picture.

(Whereupon, at 12:05 p. m., the committee adjourned subject to the call of the chairman.)

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MONDAY, MARCH 1, 1937.

UNITED STATES SENATE,
Subcommittee of the Committee on Agriculture and Forestry,

Washington, D. C. The subcommittee met, pursuant to notice, in the hearing room 324 Senate Office Building, at 10 a. m., Senator James P. Pope presiding.

Present also: Senator Schwellenbach and Senator Frazier.

Senator POPE. I think we may proceed, gentlemen. We have here this morning Mr. Valgren, who has very kindly consented to discuss this matter of crop insurance before the committee. As was developed in the testimony Saturday, Mr. Valgren has probably made a deeper study of this subject than any other person, and I know for several years he has been writing articles on the subject, and I have had the pleasure of reading his testimony during the hearings before this committee in 1923, and I think Mr. Valgren can give us some very valuable information and that his opinions of this bill and this plan now before us will be very helpful to the committee. So, Mr. Valgren, if you will come forward. we will be glad to hear you. First, you might give us your full name and the position you now occupy. STATEMENT OF V. M. VALGREN, PRINCIPAL AGRICULTURAL

ECONOMIST, FARM CREDIT ADMINISTRATION

Mr. VALGREN. Mr. Chairman and gentlemen, my name is V. N. Valgren. I am employed by the Farm Credit Administration at the present time with the civil service title of principal agricultural economist.

I was with the Department of Agriculture most of the time from 1915 until 2 years ago, when I transferred to the Farm Credit Administration—that is, 1 was with the Department from 1915 until 1935, except for 3 years that I spent in the employment of an insurance company, the Automobile Insurance Co. of Hartford, Conn. which is a fire insurance company controlled by the Aetna Life.

Senator POPE. You might indicate the nature of your studies of this particular subject matter and the period of time it covered.

Mr. VALGREN. I have been much interested in the question of crop insurance for the farmer practically ever since I came with the Department of Agriculture in 1915. Shortly after 1915, as many of you know, bills began to be introduced from time to time in Congress, either authorizing the setting up of a crop insurance corporation or board, or providing for special studies of the question of crop insurance. Several such bills appeared during the World War, and then, as many of you recall, in 1923, a special committee of the Senate held

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